A raft of New York law firms are following Cravath Swaine & Moore’s decision to pay a special ‘one-off’ bonus of up to $65,000 (£31,200) to associates and counsel.
As reported by Legal Week sister publication The New York Law Journal, Cravath set the ball rolling last Monday (29 October), announcing that associates will pocket a one-off payment of between $10,000 (£4,800) and $50,000 (£24,000), in addition to their standard year-end bonus.
New York rivals Simpson Thacher & Bartlett and Debevoise & Plimpton were first to react, announcing similar packages last Wednesday (31 October), offering associates the same amount.
Since then a number of other Manhattan firms, including Cleary Gottlieb Steen & Hamilton and Milbank Tweed Hadley & McCloy, have also announced their associates will bag similar one-off deals. The New York offices of the UK’s magic circle firms are also expected to follow suit.
Cravath associates will also rake in significant sums in their usual year-end bonuses. Lawyers at the firm will be paid between $35,000 (£16,800) and $60,000 (£29,000) at the same time as the one-off bonus.
The moves mean a one-year qualified associate at a top Manhattan firm can now take home more than $200,000 (£96,000), while a senior associate can rake in around $420,000 (£201,000).
The bonus payments come just 10 months after Simpson Thacher kicked off a salary war in the US when it raised its associate base salaries 10% to a new benchmark of $160,000 (£77,000), a move that was quickly followed by rivals.
Although the latest bonus round follows a period of sustained deal activity with law firms consistently posting robust financial figures, some partners are worried that dishing out hefty bonuses to employees could see law firm culture mirror that of investment banks. One London partner at a US firm commented: “We want to avoid a situation where there is a lot of hiring when the economy is good and a lot of firing when there is a correction, like investment banks. If bonuses continue to spiral there is a danger of this happening.”
However, other partners are confident this will not happen. Sullivan & Cromwell chairman Rodgin Cohen said: “I think it [law firm compensation] will remain different [from investment bank compensation] for at least a number of years. Law firm associates still get the majority of their remuneration through their salary, rather than their bonus, which I am in favour of.”
